ENCARNACION ENRIQUEZ LLAMAS, ET AL., plaintiffs and appellants, vs. COMMISSIONER OF INTERNAL REVENUE, ET AL., defendants and appellees.

[CA-No. 63510-R. December 4, 1980.] * ENCARNACION ENRIQUEZ LLAMAS, ET AL. , plaintiffs and appellants , vs . COMMISSIONER OF INTERNAL REVENUE, ET AL. , defendants and appellees . Jesus B. Velasco for plaintiffs and appellants. Solicitor General Estelito P. Mendoza, Assistant Solicitor General Santiago M. Kapunan, Solicitor Erlinda B. Masakayan, and Special Attorney Cesar A. Pangilinan for defendant and appellee Commissioner of Internal Revenue. Federico V. Noel for other defendant and appellee. SYLLABUS TAXES; ESTATE OR INHERITANCE TAX; COLLECTION AFTER DISTRIBUTION OF DECEDENT'S PROPERTIES. An estate or inheritance tax, whether assessed before or after the death of the deceased can be collected from the heirs by public auction by virtue of a writ of execution even after the distribution of the properties of the decedent (Palanca vs. Commissioner of Internal Revenue, 4 SCRA 263). APPEAL from a judgment of the Court of First Instance of Leyte, Br. IV Auxencio Dacuycuy, J. The facts are stated in the opinion of the court. D E C I S I O N VILLALUZ , J p : On appeal to this Court is the Resolution on Motion to Dismiss Based on Res Judicata issued on June 27, 1977, by the Court of First Instance of Leyte, Branch IV, the Honorable District Judge Auxencio Dacuycuy presiding, in an action for annulment of sale at public auction (Civil Case No. 5477) of Lots Nos. 2117 and 2118 of the Tacloban Cadastre to defendant-appellee Carmen Tiu. The concluding portion of the aforesaid resolution reads: "It appearing from the pleadings in this case and the records of Special Proceedings No. 137 of the Intestate Estate of Manuela Dioso; Special Civil Case No. L-33076, an appeal by certiorari to the Supreme Court from Civil case No. 4426, entitled 'Encarnacion Enriquez Llamas vs. Commissioner of Internal Revenue Misael P. Vera' for annulment of the Order of Judge Godofredo Escalona, dated October 13, 1966, directing the heirs of Manuela Dioso to pay their estate and inheritance tax; and, Civil Case No. 4892 (Branch IV), entitled 'Panfilo Enriquez vs. Commissioner of Internal Revenue, Carmen Tiu and Sheriff Fortunato Araullo', for annulment of auction sale of Lots 2117 and 2118, all of which adjudicated identical facts and issues, that the judgments in the former suits mentioned above especially in Civil Case No. 4892 decided by the Presiding Judge of this court on March 10, 1975, are decisive of this case and constitutes a bar to the cause of action set out in the complaint herein, it is ordered that this case be and is hereby dismissed with costs against the plaintiffs. SO ORDERED." Dissatisfied with the lower court's pronouncement, the instant action was taken by appellants on the following grounds, to wit: "1. The lower court erred in dismissing the case at bar on the ground that are not indubitable. 2. The lower court erred in dismissing the case, thus depriving the plaintiffs of their right to be heard and of due process of law. 3. That the lower court erred in not proceeding with the trial of the case and avoid multiplicity suits and allow execution for the sake of expediency. 4. That the lower court erred in depriving the other defendant who desires to present her evidence such right to be right to be heard regarding her allegations of damages." The records reveal that on September 3, 1976, appellant Encarnacion Enriquez Llamas, assisted by her husband and co-appellant Gaspar Llamas, instituted an action for annulment of sale at public auction with the lower court, substantially alleging, among other things, that appellant Encarnacion Enriquez llamas is one of the heirs f the late Manuela Dioso, whose estate was subject to Special proceedings Nos. 137 and 833 in the Court of First Instance of Leyte; that Special Proceeding No. 137 was terminated and closed about twenty years ago while Special Proceeding No. 833 is still pending before the lower court; that in the first proceeding, the heirs agreed, with the sanction of the court, that lots 2117 and 2118 (subject of the case at bar) of the Tacloban Cadastre shall be possessed by appellant Encarnacion and said lots having been adjudicated to the estate of Ciriaco Enriquez; the said appellant continued possession of the property in issue until the present; that appellee Sheriff Fortunato Araullo sold at public auction the aforesaid lots to appellee Carmen Tiu purportedly to satisfy the estate and inheritance taxes of the estate of Ciriaco Enriquez and turned over the proceeds thereof to appellee Commissioner of Internal Revenue; that the estate of Ciriaco Enriquez is not liable to the taxes alleged, it having already paid the same and that the lots were presently under custodia legis and the sale was not approved by the court nor the consent of the heirs of the estate of Ciriaco Enriquez given; and that if the sale was to satisfy the estate and inheritance taxes of Manuela Dioso in Special Proceeding No. 137 said proceeding have long been terminated and the auction sale is null and void due to prescription and laches. Appellants, thus, prayed for the annulment of the said auction sale of the lots in issue. Appellee Carmen Tiu filed an answer with counterclaim on November 20, 1976. Aside from denying the material allegations raised in the complaint, appellee Carmen Tiu alleged, by way of special and affirmative defenses, that the lots in question were sold at public auction to satisfy the liability of the estate of Manuela Dioso for estate and inheritance taxes which had been previously determined in the Court of First Instance of Leyte in Special Proceeding No. 137, entitled "Intestate Estate of Manuela Dioso" and were thus sold by virtue of a writ of execution issued by the said court; that she is an innocent purchaser for value of the said lots and, therefore, after having registered the said and issued a subsequent final deed of sale and the properties titled in her name, is protected by law; and that the cause of action is barred by several prior judgments enumerated in paragraph 4 of her answer. She, thus, asked the court to declare her absolute owner of the lots in issue and to grant her actual, moral and exemplary damages as well as attorney's fees, by way of counterclaim. On the other hand, appellees Commissioner of Internal Revenue and Sheriff Fortunato Auraullo, filed on march 23, 1977, their answer to the complaint. The two raised, by way of special and affirmative defenses, substantially the same allegations as those raised by co-appellant Carmen Tiu, to wit: bar by prior final judgments and orders of the lower and appellate courts. The defense of res judicata was again raised by the Commissioner of Internal Revenue and the Sheriff when they filed May 12, 1977, a "Motion to Consider the Affirmative Defense of Res Judicata Alleged in the Answer" and asked the court for the outright dismissal of the case. An opposition to this motion was filed by appellants on June 16, 1977. Appellants, on June 20, 1977, submitted certified true copies of the pleadings and orders in previous cases involving the lots in question in support of their motion of May 12, 1977. The lower court resolved said motion in its resolution issued on June 27, 1977, in favor of the defendants therein, by ordering the dismissal of the case. hence, this appeal. The main issue raised by the present appeal, as revealed by the discussion of appellants in their brief, is whether or not lower court was correct in dismissing the appellants' action in Civil Case No. 5477 for annulment of the sale at public auction of Lots Nos. 2117 and 2118 of the Tacloban Cadastre upon the ground of res judicata based on prior final orders and judgments. After a careful perusal of all the records relative to the case at bar in relation to the existing laws and jurisprudence applicable thereto, We are constrained to answer the issue raised in the affirmative. One. It must be noted that the properties in question were originally part of the estate of Manuela Dioso and were subsequently distributed to the heirs of said estate (appellant Encarnacion Enriquez Llamas included) subject to the liability of the heirs (appellant Encarnacion Enriquez Llamas included) for heir proportionate share in the estate and inheritance taxes due from estate of Manuela Dioso pursuant to the lower court's Order dated October 13, 1966, in Special Proceeding No. 137 which granted the Motion for an Order of Payment of taxes filed by appellee Commissioner of Internal Revenue in accordance with the project of partition submitted by the heirs of Manuela Dioso as approved by the court below through its Order of Distribution dated September 29, 1960. Basing alone on the Order of distribution dated September 29, 1960, approving the project of partition of the estate of Dioso, which included, among others, statement reading: "4. That each and all the heirs shall correspondingly answer for the estate and inheritance taxes that will be finally assessed by the Bureau of Internal Revenue against the estate in equal proportion among all the heirs. In this connection it is agreed that all the titles of the properties which shall be partitioned shall be annotated with a first lien in favor of the Bureau of Internal Revenue to guaranty the payment of estate and inheritance taxes which temporarily has been assessed at P68,995.63 which amount may be reduced later on after reinvestigation." it is clear that the right to possession and ownership of the heirs of the deceased Manuela Dioso to the lots in issue is clearly inferior to the right of the government to collect estate and inheritance taxes due to it. The heirs (including appellant Encarnacion Enriquez Llamas) cannot be made to contradict their agreement appearing in the project of partition duly approved by the court and should be understood that the heirs would satisfy their respective share in the taxes ( Prieto vs. Valdez , No. L-6779, August 31, 1954, unreported). Two. While it is true that the appellant Encarnacion Enriquez Llamas (for her and her co-heirs' behalf) filed an action for annulment of the court's Order of October 13, 196, in Special Proceeding No. 137(which ordered them to pay the taxes due from the estate of Manuela Dioso), said action (Civil Case No. 4426) was, however, dismissed by the lower court in its Order of September 1, 1970, which Order was sustained by the Supreme Court when it denied for lack of merit the petition for review on certiorari filed by the plaintiffs, in Civil Case No. 4426. Such that when the property in issue was sold at public auction pursuant to an alias writ of execution issued by the lower court to enforce the judgment of October 13, 1966, appellee Carmen Tiu had acquired legal right to the same virtue of the valid sale and upon registration of the final deed of sale and the issuance of the title in her name, she became absolute owner thereof (Gonzales vs. Calimbas and Poblete, 51 Phil. 335). Three. The claim that the auction sale was for the satisfaction of the taxes due from the estate of Ciriaco Enriquez (see Appellants' Brief, p. 8) cannot be sustained. It is clear from the certification of sale (Annex 3 that the sale was by virtue of an alias writ of execution issued by the court below relative to Special Proceeding No. 137, which settled the estate of Manuela Dioso and wherein the late Ciriaco Enriquez was one of the heirs. And as correctly stated by the court below in the related case of "Panfilo Enriquez (also an heir of Manuela Dioso) vs. Commissioner of Internal Revenue, et al." docketed as Civil case No. 4892 (CFI Leyte, Branch IV). ". . . It should be stressed en passant that this order of distribution was a conditional one in the sense that title to the partible properties was vested in the distributees subject to the paramount lien of the government for inheritance taxes. this condition was attached to the order of distribution in view of the clear provision of rule 90 that 'no distribution shall be allowed until the payment of the obligations above mentioned has been made or provided for, unless the distributees, or any of then give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs'. It is only after the payment of all existing debts, funeral charges, expenses of administration, allowances to the widow, and inheritance tax chargeable to the estate that an administrator may lawfully proceed to the distribution of the estate. Such distribution and the discharge of the administrator prior thereto are void." ( Villanueva vs . Chavez , 24 Phil. 170; Escuin vs . Escuin , 11 Phil. 332) . . . (Resolution on Defendants' Motion to Dismiss, quoted in Appellees' Brief, pp. 5-19). Before the debts are fully paid, the estate of Manuela Dioso cannot be said to have been legally distributed. Four. Also, a reading of the issues raised in the case subject of the present appeal clearly reveals that they were the same issues raised and litigated or could have been raised and litigated in the three previous cases, namely, Civil case No. 4426, Civil Case No. 4753 and Civil Case No. 4892, although the last two being mainly for the purpose of annulling the sale at public auction, but also between the same parties. Thus, applying the established doctrine of res judicata , the only conclusion that can be had than that the case was properly dismissed by the court below (see Franco vs. Monte de Piedad, 7 SCRA 660; PCI Bank vs. Pfleider, 65 SCRA 13; Aguilar vs. J.M. Tuason & Co., Inc., 22 SCRA 69; see also rule 39, Sec. 49, Rules of Court). Fifth. As categorically stated by the Supreme Court in the case Palanca vs. Commissioner of Internal Revenue, 4 SCRA 263, "an estate or inheritance tax, whether assessed before or after the death of the deceased, can be collected from the heirs even after the distribution of the properties of the decedent". The sale at public auction by virtue of the writ of execution issued relative to the collection of the taxes due from the estate of the deceased Manuela Dioso, was thus, still valid, legal and can be lawfully exercised then. WHEREFORE, the decision appealed from is hereby AFFIRMED in toto . Costs against appellants. SO ORDERED. Escolin and Villasor , JJ ., concur. Footnotes * Vol. 25 C.A.R. (2s), p.